• Documentary Production

    by Tyler Dellow • June 1, 2009 • Uncategorized • 5 Comments

    I kind of figured that this was coming, both that Moyes’ team would get interested in it and that the NHL wouldn’t want them to have the information:

    The NHL has filed a court motion which says the Phoenix Coyotes have no right to examine a number of league documents pertaining to relocation — and Jim Balsillie’s previous attempts to purchase a team.

    “It appears designed to harass the League with discovery that may prove to be wholly unnecessary,” the filing says, referring to last week’s renewed 2004 motion from the Coyotes which asked to see documents reflecting rescheduling procedures involved in the transfer of the Quebec Nordiques, Winnipeg Jets, Hartford Whalers and Minnesota North Stars during the 1990s.

    I know that some media guys read this site – if I can offer some unsolicited advice, it would be that you should ask a lawyer friend to proof your copy before it gets published. Maybe even flip him the documents and ask him any questions that you might have. God knows that there are enough actual lawyers out there posting on this. The story a few weeks back that the judge had ordered production of the Reinsdorf offer appears to have arisen from a journalist seeing an unsigned draft order – which is commonly prepared by the side bringing a motion – and concluding that it was an order. In this case, it seems to me that the NHL probably hasn’t filed a motion (unless they’re also bringing a cross-motion) but that they’ve filed responding material to Balsillie’s motion.

    I didn’t like Balsillie’s chances of success on the motion to force production of the Reinsdorf letter of intent. Intuitively, I like his chances of success better on this motion, particularly because I think that Bill Daly’s declaration, dated May 13, 2009, put the NHL’s process squarely at issue:

    62. In terms of timing, the consideration and approval process relating to a proposed franchise relocation takes at least three to four months. A complete application must be submitted to the League addressing the variety of relevant factors addressed in By-Law 36 [ed. This is basically a list of things that you'd consider when deciding whether or not to relocate a team.] which must then be studied and verified by the League, generally with the assistance of outside professionals, and a report and recommendation is prepared internally by the League for review and consideration by the Executive Committee, and then the full Board of Governors.

    At each stage, there typically are additional questions, further information requested and further analysis required and performed. Finally, a significant issue for many potential franchise relocations, which would also be true here, is whether and how the League can or should realign its teams in the event the proposed relocation is approved by the Board. Given the significant distance between Phoenix and Southern Ontario, the League would have to completely rework not only the Coyotes’ schedule, but also the individual team schedules for every Member Club in the League.

    In addition, it may be necessary to modify the existing Conference and Division alignments, which would also effectively disrupt and disorient the League’s current scheduling matrix. In the meantime, teams are already selling season tickets for next season to fans who expect the existing rivalries and Division and Conference alignments to remain in place. This, of course, is why the By-Laws specifically require that all relocation applications must be made by January 1 of the year preceding the season in which the team proposes to begin play in its new location.

    Whoever drafted this for Daly seems to have made a bit of an error with the last sentence – the By-Law provides that it shall be done by January 1 of the year prior “…unless a majority of Member Clubs consents to a later filing date.” That’s a big difference, I think.

    I would assume that the motion actually asks for a little bit more than the Spectator is reporting. In particular, I would suspect that they’re asking for any information that the NHL may have relating to relocation applications that were not approved. As far as I know, there haven’t been any.

    On its face, it’s hard to square Daly’s declaration with what we know about how past moves have taken place. The Jets’ move to Phoenix was approved by the NHL on January 19, 1996; they started the 1996-97 season in Phoenix. The North Stars announced that they were heading to Dallas on March 11, 1993. Hartford announced that they were relocating (although not to where) on March 26, 1997. In July it was announced that they were moving to Carolina and they were there for the start of the 1997-98 season. Most interestingly, the sale of the Nordiques, which involved all of the things that the NHL is complaining about, including a late move from one conference to another, didn’t happen until May of 1995, with the Nords in Denver to start the following season. It’s fair for both Balsillie and the judge to wonder why those transfers could be completed on short notice and this one, according to Daly, can’t.

    Unless there was a lot going on behind the scenes more than a year before all of these teams announced that they were leaving, which would be an embarassment to the NHL to have to disclose, it appears that the January 1, Year – 1 rule is one that has been honoured in the breach. More pointedly, given the timelines described, I’m having some trouble understanding how the processes described by Daly could have played out in the past. Much of his evidence is vague on this point is vague and it basically amounts to a floodgates argument to the effect that allowing a Coyotes move would unleash the hounds of hell, with massive consequences for the NHL. It’s not very detailed though, just a list of horrendous consequences for everyone, which kind of gives it a feel of advocacy rather than information.

    When the NHL is making these decisions behind closed doors, it’s easy to make up the rules as they go along. The constitution’s vague, with lots of room to be overridden by a majority, as are the by-laws. The difficulty that they face is trying to achieve their desired result of rejecting Balsillie and rejecting a move when he appears to be an otherwise qualified buyer, with a bankruptcy judge looking over their shoulder as the deals are cut and the decision is made. It’s not as easy to mark the cards when there’s a neutral dealer.

    As a great philosopher once said (I’m paraphrasing), what I don’t know about antitrust law can just about be squeezed into the Grand Canyon. As I understand the issue, it seems that there’s something of a consensus that the NHL’s procedures themselves are legal and that Balsillie’s only hope is that they either a) accept him as a buyer and permit the move of the team or b) violate antitrust law or their own rules in coming to a decision. For the sake of discussion, say that this point is conceded.

    I’m not a bankruptcy lawyer (I’m not even a lawyer outside of Ontario) but I assume that any decision that the NHL makes with respect to Balsillie’s application to be an owner and his transfer application will be subject to some degree of scrutiny by the court. Even if it’s accepted that the NHL has a right to make the decision, to what degree are they free to do whatever they want with his application? That, I would think, is where the real issue lies: to what degree of scrutiny will the bankruptcy judge subject the decision of the NHL? I would think that there’s an argument that there should be at least some degree of scrutiny, because the judge is required to look out for the interests of hte creditors.

    If he’s willing to subject the NHL’s decisions to some scrutiny, then I think that things can start to get awkward for the NHL. Would anyone care to bet that the processes relating to the movement of the Jets, Whalers, Nordiques and North Stars weren’t slap dash affairs? Given the timing, it almost seems to me that they must have been – unless it was all done quietly well in advance, in which case the NHL and Bettman are going to be faced with embarassing questions every time there’s a team in trouble in the future: “Has there been an application to move the team? Are you being honest this time?” It’s surely something that the NHL does not want.

    While this is nothing more than some legal flavoured speculation from a guy who’s only been around the law for five years or so and in a different area to boot, Balsillie’s continued push for greater production from the NHL makes a lot of sense if he’s ultimately driving towards an argument that they aren’t treating him (and, by extension, Moyes and the other creditors) fairly. I’m entirely spitballing this but, barring a home run from Balsillie on the issue of wiping out any restrictions related to movement of the Coyotes (both in terms of getting the judge to decide it and in getting him to decide it in his favour), I kind of think that this is the question that the court is going to have to end up dealing with. No matter how it turns out, hopefully embarassing releases of documents continue to be the order of the day.

    About Tyler Dellow

    5 Responses to Documentary Production

    1. June 1, 2009 at

      Either Balsille’s brute force approach has netted him some interesting and positive legal side effects or he has some very sly strategists advising him.

    2. Joe
      June 2, 2009 at

      I would say this kind of thing is exactly what he wanted going into it, Kyle. It was generally agreed that he would never be allowed to walk through the front door here, as long as it was just him and the NHL. His only way was to try to push his way in the back via the courts, or barring that, if he could haul out enough dirty laundry, perhaps he could get a court to take him by the arm and escort him right through the front door.

      Upon all this news breaking of the bankruptcy and Balsillie’s offer for the team, it was pretty clear there wasn’t a better plan in place or even upcoming that would look as good to all the creditors involved, which would’ve made the NHL have to do some serious contortions to get around. If, in the process, he can kick the NHL leadership in the shorts, even in a losing effort, its still a win, because he can keep kicking over different issues up until the NHL finally relents and lets him in.

    3. David Staples
      June 2, 2009 at

      Profile of Basillie’s right hand man.
      http://www.sportsbusinessjournal.com/article/62661

    4. mc79hockey
      June 2, 2009 at

      Good link David. Either I’ve read it, or something similar before, or I’ve kind of independently come to the same conclusion as to where they’re going. Rodier is quoted:

      “To characterize what we’re doing as rogue or agitator or trying to get around the rules is a mischaracterization,” Rodier said. “We’re trying to say, ‘Follow your own rules.’ The rules are there to create the fiction that the league is following applicable antitrust law, but it’s not.”

      That’s exactly what this move looks like to me.

    5. June 3, 2009 at

      This makes me wish I knew anything at all about american anti-trust laws.

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